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Nevada Attorney General Masto Files 606 Count Criminal Indictment Against Two Title Officers (Updated: Lender Processing Services Employees)

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The Nevada attorney general Catherine Cortez Masto has just filed a 606 count indictment against two title officers in a single county, Clark County, for supervising the filing of tens of thousands of fraudulent documents in a robo-signing scheme.

On the one hand, this indictment is not as gratifying, say, as busting Angelo Mozilo. On the other hand, if low level supervisors in bank frauds face the risk of serving time, you are going to find a ton fewer people willing to take that job. Those higher up on the food chain might also have to be a lot more careful and pay the people involved more money, which in turn undermines the basic logic of these abuses, which is cost savings.

In addition, as mob prosecutions have shown again and again, you start by going after the foot soldiers in the hope that they roll people higher up on the food chain.

And at a minimum, this action says that the law and due process matter, and violations, particularly large scale, systematic violations, can and will be punished.

From the press release:

According to the indictment, defendant Gary Trafford, a California resident, is charged with 102 counts of offering false instruments for recording (category C felony); false certification on certain instruments (category D felony); and notarization of the signature of a person not in the presence of a notary public (a gross misdemeanor). The indictment charges defendant Gerri Sheppard, also a California resident, with 100 counts of offering false instruments for recording (category C felony); false certification on certain instruments (category D felony); and notarization of the signature of a person not in the presence of a notary public (a gross misdemeanor)…

The indictment alleges that both defendants directed the fraudulent notarization and filing of documents which were used to initiate foreclosure on local homeowners.

The State alleges that these documents, referred to as Notices of Default, or “NODs”, were prepared locally. The State alleges that the defendants directed employees under their supervision, to forge their names on foreclosure documents, then notarize the signatures they just forged, thereby fraudulently attesting that the defendants actually signed the documents, which was untrue and in violation of State law. The defendants then allegedly directed the employees under their supervision to file the fraudulent documents with the Clark County Recorder’s office, to be used to start foreclosures on homes throughout the County.

The indictment alleges that these crimes were done in secret in order to avoid detection.

The full indictment is here as well as below:

Nevada Robosigning Indicment 11-16-11

Update: Two sources close to the investigation have told me the targets of the lawsuit are employees of Lender Processing Services. That strongly suggests that Masto is, as we indicated earlier, using these indictments as a wedge to go after much broader abuses in the servicing industry. LPS’s biggest business is its Default Services Group, which both managed the operations of foreclosure mills (people with knowledge of LPS charge that the firm even kicks out certain standard form documents for foreclosure mill attorneys to file) and also often acted as the arms and legs of servicers in other arenas (for instance, managing, or more accurately, mismanaging property seized in foreclosure).

LPS has always taken the position that anything it did was at the direction of and with the full knowledge of the servicers. If Masto is shrewd, her objective will be to audit LPS’s software, since that will demonstrate pattern and practice, and it will be impossible for servicers to deny that processes embodied in ongoing, routinized activities were unknown to them.

Update 12:30 AM: April Charney provided documents that showed that the targets of the suits worked for LPS, but rather than upload them and embed them to convince you, the Wall Street Journal got confirmation from LPS that both are employees

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43 comments

  1. anon48

    YS: In addition, as mob prosecutions have shown again and again, you start by going after the foot soldiers in the hope that they roll people higher up on the food chain.

    Absolutely! Relentlessly nailing the minions who knowingly and willingly helped perpetrate fraud on the front lines, could provide the evidentiary foundation for pursuing the C-Suite crooks- those criminals who were actually responsible for orchestrating the robo-signing fiasco. Maybe this will encourage other state AG’s to do the same.

    Thanks for the info.

    1. ScottS

      Having read Gang Leader For a Day and Freakanomics, I question the value of “getting” the head of a criminal organization. There are dozens of people praying to take the boss’ place if he goes down. And they will have to do some violence to consolidate their new position.

      The foot soldiers are barely getting by as it is, often making less than minimum wage. Lean on them, make their life difficult, and they will go somewhere else — especially if they give up hope of ever becoming the boss.

      Prosecutors are more interested in the big fish for reasons of personal ego.

      1. anon48

        So, the implication is that these indictments are a waste of time?

        Au contraire- First, I’ve followed the Feds’ pursuit of the Philly mob from the early 80′s through the beginning of this decade. Most knowledgeable people would agree the result has been a dramatic decrease in the mob’s influence during that period. It IS TRULY an effective strategy.

        Second, wasn’t the Black Kings gang broken up in the end?

        Third, unlike everyone who joined the Philly mob or Black Kings, a majority of the people who joined the various financial firms that created most of the problems most likely did not aspire at the outset to join a known criminal enterprise. Rather, due to financial incentives, coercion and other opportunities or pressures that were encountered along the way, some of them eventually made a conscious choice to participate in the robo-signing process.

        So the strategy outlined in the article should be even more effective with these people than it was with the mob.

        1. PL

          Good point about the differing initial motivation of mob foot soldiers and robosigners. You’re probably right that most employees engaged in robosigning initially thought they found a decent job and only later understood that what was being asked of them. They then made a conscious choice to go along with the fraud or not. Pity so few have chosen the later. Isn’t it interesting that the US Attorney has gone after the Philly mob, but has done nothing so far about the banksters in nearby Fort Washington? Now what could be the reason for excusing robosigning but not traditional fraud?

          1. Francois T

            “Now what could be the reason for excusing robosigning but not traditional fraud?”

            Been raking my brain on that one for years…until I read this factoid: Presidential re-election bid will cost north of a billion dollars (gasp!)

            Who has this kind of (legal) money to give?
            Banksters and compadres.

            Ergo…let’s excuse financial fraud, to which, BTW, Obama is doing a phenomenal job. See this graph:
            http://www.ritholtz.com/blog/2011/11/bank-fraud-prosecution-continues-to-drop-under-obama/

            Brotha Obysmal really fooled a lot of us, didn’t he?

      2. Binky the perspicacious bear

        Based on those two cites I suspect you need to broaden your suite of references to those that might be factual and relevant.

    2. incognito123

      I have been saying it REPEATEDLY to go after the lower people, including to April Charney, the supposed great and almighty, yet keep getting told, they are not the true targets. I AGREE they are not the ULTIMATE target, but like you said GO AFTER THEM AND LET THEM SPILL THE BEANS ON THE HIGHER UPS!!! THEY *ARE* OUR ULTIMATE TARGET!!! Thanks!! And while many get frustrated with filing complaints that are ignored, we MUST ramp this up – A LOT, making sure ALL complaints are well documented and supported with clear violations of Statutes, Codes, Rules, etc.

      1. kravitz

        in this economy, the little people will put the higher ups on the block for a deal. that’s what this suit is about.

      2. LucyLulu

        Unless April Charney has moved on recently, she defends homeowners in foreclosure suits, for Legal Aid in Jacksonville, Florida. She is not a prosecutor. There is also no love between her and LPS (which also, coincidentally, happens to have HQ in Jax), to say the least.

        Ms. Charney IS the “great and mighty” to many homeowners who would otherwise have found themselves wrongfully evicted from their homes. She has been one of the pioneers in the field of foreclosure fraud, and works for her pay at a non-profit agency when she could be drawing benefits as a partner at some prestigious firm.

        1. Jane

          Thanks for that Lucy – I am a Florida resident and know how cosy our AG Pam Bondi is with LPS. Quite a bit of ‘revolving door’ activity and they gave generously to her election campaign. Florida is knee deep in filth when it comes to Talahassee politics, especially since Rick Scott was installed as Governor. Two great deputy AGs, June Clarkson and Theresa Edwards were let go earlier this year, despite (or because of) the fact that they were successfully prosecuting foreclosure mills engaged in high jinks. I hope this puts the wind up Bondi – she has done zilch to help the homeowners in this state where 25% of mortgage holders are either in default or foreclosure, and the courts are full of fraud.

    3. LucyLulu

      Though they may not be top execs of LPS Default, I wouldn’t classify these two as the bottom of the food chain either. They weren’t the ones actually doing the signing of the documents. Those people were at the bottom. Irregardless, the indictments are useful, as Yves pointed out, because LPS is the biggest fish in the sea when it comes to foreclosure mills and it can be used to unearth their business practices, which are alleged to be pretty standard nationwide. Their software package is infamous for being the complete “bake-it-from-scratch-foreclosure” package that is simple enough for any child to use.

    4. Lyle

      The second item is to make an example so other small fish think twice before trying this. Throw some in jail and others will think that there is a chance they could be next. Much of law enforcement is also about making an example, so that the price of wrongdoing in a persons mind is increased, leading to a different decision when confronted with the opportunity.

  2. John Lenihan

    You ain’t seen nothing yet!

    What is the most massive amount of money owed to banks, after mortgages? Unsecured credit card debt! Most of it is uncollectable. Why would they shrink from fraud and chicanery to get much of it back? They would not and will not. They will try to pin the loss on the nearest available sucker.

    With considerable difficulty, I prevailed in the first false credit card claim (by BofA naturally) against me, because I had rock-solid proof; the second by a different bank is close to being beaten. These were not “mistakes” in my opinion, but actual bare-faced fraud.

    The banks will get their “pound of flesh” one way or another; most people will not be able to produce the detailed receipts and proofs that I had, and they will get taken, and taken badly.

    1. Rex

      I’m curious what was the general nature of the false credit card claims. Were these invalid charges on cards you were issued or some other scenario?

      1. Clonal Antibody

        One of the most common frauds was internal to the Credit Card companies. Remember that Credit Cards are given out as freely as candy, with NO “underwriting”

        Your SS No. is freely available to the CC cos. Somebody in the company issues a card in YOUR name, or one “Guaranteed by you” to a close associate (not connected with the CC co) Charges are made to the limit of the account (these typically are the limits on your real account.) No payments are made on that card.

        The CC co comes after you for those charges. You tell them that the card was not authorized by you. It is put down as a case of identity theft.

        However the story does not end here. The bank does not want to declare this as a loss. So they continue to keep it on the books as collectable. At some point this “loan” gets bundled and sold to collection agencies, and you continue to get hounded by them, and you are dinged by the credit ratings agencies!

      2. Yves Smith Post author

        There have been a lot of abuses, credit card debt collectors trying to con relatives of dead people that they are on the hook for the money (not true), going after the wrong person (similar name), pursuing debts without verifying the amount (often the total sought is wrong, of course too high). Sometimes trying to pursue debts where the statue of limitations has passed.

        And their practices are pretty much always abusive: calling people multiple times during the day, at work, etc. Those are against Federal law.

  3. Cheyenne

    There is NO WAY I can read all 606 counts in this complaint. I’ve been involved in litigation that’s lasted 50+ years (no, not from the beginning semi-obviously), and I have NEVER come across a complaint so massive.

    Consequently, I picked a random count to read, to wit: #227:

    “Offering a False Instrument for Filing or Recording
    (Aid & Abet)
    Felony NRS 239.330

    Now, I have no earthly idea of what the black letter elements of an NRS-239.330 conviction necessarily comprise. But I do know what it looks like when someone throws the book at you, and this here is big hurtling book.

    Can you even settle a case for 500+ counts without a mandatory mediator to make sure everything’s cool? I don’t know.

    But I do know this: if none of the six hundred and six counts sticks, we have a super-duper bad problem.

    1. Jane Doe

      THis case is not all that large when compared to large scale securities litigation, and I am therefore left wondering what you are talking about in terms of case sizes that you have dealt with in the past.

  4. PL

    The defendants are LPS employees? Now we’re getting somewhere! Are the notaries also employed by LPS?

    Back office staff testified against foreclosure mill kingpin David J. Stern in civil proceedings in Florida. That’s the way to develop evidence of robosigning.

  5. Betty Anderson

    This is crap. They were doing as directed to meet crazy timelines that investors that were bailed out! Required, they did not profit from this LPS did as always. They ruined the industry as well as MERS!

    1. Jane

      What are you saying? Of course they profited from it – they were getting paid. And by the way, it looks like they broke the law too.

  6. Betty Anderson

    They need to go after the people that somehow thought they could promise these timelines! Fnma and Fhlmc expected this since 1997when all the BS outsourcing began! Get back to the basics! Trustees dealing the BANKS and not some robots playing the telephone game. LPS and MERS have to justify there existence and fees and they ruined clean practices! They profited not the workers! Now two peoples lives are ruined! For who! Corporate America?

    1. Yves Smith Post author

      You REALLY don’t get it, do you? And you didn’t read the post, apparently.

      You go after LPS supervisors to get to LPS practices and LPS executives, probably also Fidelity (LPS was spun out of Fidelity, I guarantee to limit liability).

      You use THAT to go after the clients, since LPS’s position has always been that it was only doing what its clients wanted, with their knowledge. That means the servicers and Fannie and Freddie.

      1. just me

        And now Wisconsin:

        http://www.rrstar.com/news/x495077286/Winnebago-County-recorder-still-finds-instances-of-robo-signing

        McPherson is one of 12 county recorders collecting evidence of mortgage document fraud for Illinois Attorney General Lisa Madigan.

        She joined the wave of state attorneys general investigating foreclosures in May when she issued subpoenas against Lender Processing Services and Nationwide Title Clearing, two Florida-based companies that provide “document preparation services” for mortgage lenders to use against borrowers who are in default, foreclosure or bankruptcy.

        McPherson’s office sampled a small number of foreclosure documents in her office and found hundreds of apparent forgeries.

    2. Paul Tioxon

      You know they still prosecute very old Nazi guards, you don’t have to be Hitler to be guilty of one murder or an accomplice to just one crime. One small foreclosed, one ruined family, one divorce, one traumatized child with panic attacks for the rest of their life, just one is enough, start making people pay for their crimes. Even if it is not a TRILLION DOLLAR MASTER OF THE UNIVERSE, it still is a crime and could not be committed in aggregate without all of the thousands of people who carry out the operations. Hitler only died once for all of the tens of millions he murdered, there can never be any justice for crimes so large we can bare measure them. The smallest figures carry out these policies, there can be justice for them, for the one or two or ten or twenty lives they ruined.

    3. Greg R

      If you doubt the value of putting lower-level management on the stand, read the testimony of Linda DeMartini in Kemp vs Countrywide(US Bankruptcy Court, District of New Jersey).

  7. Betty Anderson

    They need to go after the people that somehow thought they could promise these timelines! Fnma and Fhlmc expected this since 1997when all the BS outsourcing began! Get back to the basics! Trustees dealing With the BANKS and not some robots playing the telephone game. LPS and MERS have to justify there existence and fees and they ruined clean practices! They profited not the workers! Now two peoples lives are ruined! For who! Corporate America?

    1. PL

      They could have refused. They could have said “No. I won’t direct staff to robosign my name or fraudulently notarize my signature to meet your deadlines. I refuse to be complicit in a scheme to defraud homeowners of their property.” Instead, they willingly participated in a criminal conspiracy and they will pay the legal consequences for it. They showed no sympathy to those in foreclosure and we don’t owe any sympathy to them now that they’ve been caught.

    2. KenInIA

      What name(s) did you use when robosigning? Seriously, your panicky defense of people who repeatedly and knowingly broke the law suggests personal involvement. Your defense is no more than repeating “They were just following orders.” That didn’t work for the camp guards at Nuremburg and it won’t work here. You claim that we should excuse their actions because this will ruin the lives of the people indicted while ignoring the lives ruined by their crimes. Do you not value the lives of their victims?

  8. LucyLulu

    On other fronts, my weekly mortgage update ^grin^:

    The Michigan Supreme Court overturned a ruling today from the Apellate Court back in April in a 4-3 decision upholding the right of MERS to foreclose by advertisement. This means MERS can proceed non-judicially. They claimed the lower court had too narrowly construed a 1994 statute stating a foreclosing entity’s requirement to have an “interest in the indebtedness”, and that the note and the mortgage could be assigned to different entities.

    Two county clerks filed suit in Michigan against MERS for unpaid recording fees yesterday, which will proceed. One of the clerks alleged justices acting to represent special interests vs. citizens.

    http://www.housingwire.com/2011/11/16/michigan-supreme-court-gives-green-light-to-mers

    Also, our illustrious Rep. Issa has requested that FHFA’s DeMarco obtain information on different state’s average foreclosure time length. He plans to begin withholding federal funds to those states who are taking too long to foreclose. This is in addition to the penalties that servicers have already been paying.

    http://www.housingwire.com/2011/11/16/issa-looks-to-withhold-federal-funds-from-slower-foreclosure-states

    Meanwhile, Rep. Elijah Cummings (GA) has sent a second request to DeMarco for details re: which servicers have been assessed penalties, how much, for what reason, and if penalties have been paid. Cummings has expressed concern since last year that the additional pressure to meet deadlines may be adding to problems with servicing and foreclosure abuses.

    http://www.scribd.com/doc/72920959/Elijah-Cummings-to-Edward-DeMarco

    And compensation for the top brass at Fannie and Freddie are under heavy fire. The top 10 made $13 million in bonuses in 2010 while the GSE’s have required taxpayer infusions of $180 billion since 2008 and owe the Treasury $152 billion dividends. (Don’t recall where it was reported, but when Congress asked DeMarco when the dividends could be expected to be paid, he replied, “unless conservatorship lasted until his grandchildren were around, never”.) Bonuses for the two CEO’s were about $2.3 million apiece. The House Financial Services Committee has almost unanimously passed a bill to cut the pay at F/F to that of regulators, which would set CEO compensation to under $300K. They aren’t going to be happy campers, claiming the pay is needed to attract and retain quality people. Uh huh. In this job market? There are execs in their late 50′s who will take any job they can get. (My ex, formerly with AIG, insurance, not financial, is one.) I bet there’s at least a handful who are equally qualified to lose tens of billions every year.

    http://www.housingwire.com/2011/11/16/lawmakers-grill-gse-leaders-over-bonuses

    1. PL

      The argument that Fannie and Freddie need to pay enormous compensation to attract and retain talent is disingenuous. There’s been turnover of executives who received millions that no one is acknowledging. Millions do not guarantee retention and does not justify obscene amounts of compensation.

    2. chris m

      “The Michigan Supreme Court overturned a ruling today from the Apellate Court back in April in a 4-3 decision upholding the right of MERS to foreclose by advertisement. This means MERS can proceed non-judicially. ”

      presumably this doesn’t end the inquiry for those homeowners who file suit to challenge standing.

  9. Smellslikechapter11

    What makes this interesting is that we have an action like this in a nonjudicial foreclosure state like Nevada. Imagine how big the problem is in California (note where these guys lived) or Texas. It is much harder to fight foreclosure in those states because there is no court in which the servicers can file false declarations that need to be verified by counsel. To fight a fraudulent foreclosure requires the borrower to start the lawsuit as opposed to responding to the lender’s foreclosure suit.

    1. just me

      Texas mention in Michigan registers’ class action suit story yesterday:

      http://www.housingwire.com/2011/11/15/two-michigan-counties-file-class-action-suit-against-mers

      The Michigan counties follow several Texas counties — Dallas, Hidalgo, Bexar and Harris — that have either filed a lawsuit against MERS over county recording fee or are in the process of investigating as much.

      Dallas County District Attorney Craig Watkins recently said his county is transforming its complaint against Merscorp Inc. into a class-action lawsuit so neighboring Texas counties can sign on as plaintiffs.

  10. stuhlmann

    “Two sources close to the investigation have told me the targets of the lawsuit are employees of Lender Processing Services.”

    Is this going forward as a civil or criminal case? The headline to this blog entry uses the word “indictment”, which in my mind means that these are criminal cases. This is why I am confused by the use of the term “lawsuit” later on. To me lawsuit implies a civil case. I am not a lawyer, and I have a rather elementary understanding of law and legal terms.

    1. Yves Smith Post author

      These are criminal. $500,000 and $600,000 in bail. A grand jury heard the evidence.

      They will most assuredly roll LPS.

  11. monday1929

    [Yves, you have a late-night typo/mis-speak in last sentence before the update- "unknown" should be "known" for easiest fix.]

  12. LarryTOregon

    Technical question: Image verification for e mailing this article does not appear. Unable to send. This happens often. Is it a glitch or copyright issue or??
    Thanks…..

  13. TuffsNotEnuff

    606 counts ???

    Angelo “Butcher Boy” Mozilo did more like 606,000 of these fraud filings. Every year.

    Countrywide’s standard contract for the balloon mortgages deployed non-standard terminology to the point of defrauding home buyers. But since Butcher Boy was taking home $57,000,000 a year by 2005, more later, and sold $406,000,000 in bogus stock, he bought a free walk.

    Kind like George Anderson for the Florence Flo Cioffi killing. 16-days and $350 fine for hit-and-run slaughter.

    CEOs walk.

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